Australia’s banking and financial services landscape is on the cusp of a major regulatory shift — the long-anticipated Tranche 2 Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) reforms. While these reforms are primarily aimed at bringing designated non-financial businesses and professions (DNFBPs) into the fold, their ripple effects will be felt across the entire financial services ecosystem, including SME banking and fintech players.

As an SME business owner operating in the banking industry, you need to be more than just “aware” of these changes. You need to be strategically prepared.

Here’s what your top priorities should be right now.

1. Understand the Scope of Tranche 2 — And Where You Fit

Tranche 2 aims to extend AML/CTF obligations to professionals such as lawyers, accountants, real estate agents, and high-value dealers. But don’t be mistaken — regulated banking entities and fintechs will be impacted too. Many of these DNFBPs interact with banks as customers, partners, or intermediaries, and the burden of customer due diligence (CDD) may increase on your side as a result.

Priority Action:

1. Review the current AUSTRAC guidance on Tranche 2 and assess how your customer base or third-party providers may be affected.
2. Map your exposure to high-risk sectors and determine where enhanced due diligence (EDD) may soon become the norm.
3. Prepare for increased data exchange and verification obligations across your partner ecosystem.

2. Strengthen Your AML/CTF Program Now

Even if Tranche 2 doesn’t change your obligations directly, the regulatory scrutiny is about to intensify. AUSTRAC has signalled a tougher stance on compliance — especially for businesses that appear to be operating in a regulatory grey zone.

Priority Action:

1. Conduct a health check of your AML/CTF program: risk assessments, policies, procedures, and training.
2. Ensure your transaction monitoring systems are fit-for-purpose and aligned with updated typologies, including DNFBP-related risks.
3. Document and update your reporting procedures for suspicious matters (SMRs), threshold transactions, and international fund transfers.

3. Evaluate Your Third-Party Risk and KYB Obligations

With Tranche 2 onboarding more non-traditional financial actors, your business will need to look more closely at who you partner with. Banks and fintechs offering Banking-as-a-Service (BaaS), payments infrastructure, or business accounts to accountants, conveyancers, and real estate agents will likely be expected to conduct Know Your Business (KYB) checks with more rigour.

Priority Action:

1. Review your onboarding process for non-individual customers — especially professional service providers.
2. Build stronger UBO (Ultimate Beneficial Owner) verification procedures.
3. Review your contractual and technical arrangements with third parties to ensure they are Tranche 2-ready.

4. Invest in RegTech and Automation

Manual compliance processes are no longer viable — especially with incoming reform that will expand the volume and complexity of checks. Now is the time to consider smart tech solutions that can automate routine tasks, improve accuracy, and enhance auditability.

Priority Action:

1. Explore RegTech solutions for identity verification, transaction monitoring, and risk scoring.
2. Ensure your compliance stack is modular and scalable, allowing you to adapt quickly as new Tranche 2 requirements become clearer.
3. Integrate with real-time reporting APIs to streamline submissions to AUSTRAC and reduce operational friction.

5. Collaborate with Legal, Risk, and Industry Peers

Tranche 2 compliance isn’t just a technical challenge — it’s a strategic opportunity to strengthen your credibility in a tightening market. As a smaller player, your ability to engage with the right advisors and regulators early can give you a valuable edge.

Priority Action:

1. Engage your legal and risk advisors to model the likely impacts of Tranche 2 on your product lines and customer base.
2. Join industry bodies or working groups focused on AML reform (e.g., FinTech Australia, RegTech Association).
3. Keep a seat at the table for industry consultations with AUSTRAC and Treasury as the legislative framework takes shape.

6. Educate Your Team and Customers

Compliance isn’t just about ticking boxes — it’s about building a culture of awareness and vigilance. As Tranche 2 expands public discourse around financial crime, your frontline staff and even your customers will need better tools and guidance.

Priority Action:

1. Provide regular training to your staff on AML/CTF risks, suspicious behaviours, and escalation protocols.
2. Prepare educational content for high-risk customer segments that may soon fall under new reporting requirements.
3. Embed a “compliance-first” mindset across sales, onboarding, support, and product teams.

Final Thoughts: Tranche 2 Isn’t Just a Challenge — It’s a Strategic Moment

Tranche 2 reform may initially feel like a compliance burden, but for SMEs in the banking sector, it also presents a chance to lead. The businesses that proactively prepare — those that invest in trust, transparency, and technology — will be best positioned to grow with confidence and attract regulators, partners, and customers alike.

Whether you’re a neobank, fintech lender, BaaS provider, or payments innovator, your readiness for Tranche 2 will signal your maturity in a rapidly evolving financial system.

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